Under heroic assumptions, a 15pp tariff increase with the dollar at current levels would shrink the goods-and-services trade deficit by $300-400 billion (about 1% of GDP), but since the current account deficit is 4% of GDP, this is a material change rather than elimination — and the effect on the current account may be even smaller because the investment income deficit is likely to widen.

forecastpending

Speaker

Joseph Gagnon

Evidence Quote

this is not getting rid of our trade deficit but it is a material uh change.

Source

The changing dollar regime: An updatePeterson Institute for International Economics
Created: 6/18/2026, 1:57:48 PM

My Notes

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